Performance and Reward Management - Essay Example

Performance and Reward Management Introduction The business world is becoming a competitive place whereby, high quality employees with experience become one way of the differentiating factors between successful organizations and those that are not. Every worker’s effort counts for the success of any organization. Therefore, an organization must be able to fit in the organizational structure, understand the abilities of employers to perform the definition of roles between employees and what is expected of them to the business strategy. Employers must understand the individual contribution towards achieving the goals of the business. They should try to give roles to the employee’s that are per their qualifications , conduct job rotations at the workplace and give them new opportunities as they arise and finally, they must be able to provide constant and timely feedbacks to their employees ( Cornelius 2001). Performance management Performance management when efficiently and effectively managed within the context of the organization can be very crucial in assisting the company to achieve its set goals and objectives. Usually, it leads to better information exchange, free communication between employees and the managers and to a very large extent it helps to clarify the expectations of teams, groups and individuals within the organization as a whole. As a result, performance management usually entails a feedback process that allows continuous flow of information between the employers and employees hence improving on their relations (Bratton, et al 2001). The evaluation of performance can be carried out at various levels such as evaluating the whole human resources system, evaluating the specific subsystems within the human resource, team performance and individual performance.Perfomance management has been criticized by some people who argue that it is usually manipulative of the employees whereby, the employees are usually manipulated by the managers who in most cases manipulate the reward system. According to Fletcher, most of these performance systems are usually out of touch with the reality .Another criticism that is brought out is that, the reward systems are usually manipulated by the managers such that they are able to manipulate the employees as they wish. A good performance strategy entails a good competitive strategy, organizational structure, corporate structure and good human resources processes that include a reward management (Shields 2007). Reward strategy and management Reward strategy means achieving a balance between the human resource strategies, the environment that the organization operates in including the culture, technology and the external environment. It sets out to establish the purpose and intent of the organization on how its policies and processes on rewards meet the objectives of the business (Molander, et al 1994). Companies are increasingly trying to involve employees in the decision making processes and training them so as to attract and maintain them. Reward management involves managing all those rewards that are given to employees due to their contribution towards the growth and development of a company. It also involves identifying the strategies, systems, processes and policies that enable an organization to achieve its objectives by rewarding and attracting people they require by way of motivating them. It aims at meeting the individual, organizations and team performance as per the objectives set out. According to Williams and MacDerine, proper management of the rewards system usually leads to an enhanced employee behavior and well being, a well balanced relationship between life and work and eventually it increases the motivation and performance of the employees (Cornelius, 2001). A good reward system must be able to prioritize reward plans that are in line with the human resource and business strategies. A good reward strategy has four main guiding principles which include equity, constitency, transparency and fairness. The strategy must be fair in all means according to the distributive and procedural systems of justice. People will always feel treated fairly according to how they are paid and depending on the value of their work to the company. The procedural justice means that employees opinions are considered, there is no personal bias towards employees, the decision making process is consistent to all employees and that there is proper feedback and communication (Shields 2007). Equity means that the jobs are well measured and employees are paid according to the value they add to the company with no discrimination at all. Consistency must also be considered in a reward strategy whereby any decisions on pay must not arbitrarily vary and that the management must not deviate from what is considered to be fair and equitable according to the market rates. Finally, people must be able to understand how the systems operate and how the systems affect them. All employees must be involved in the development of the practices and policies for the organization. The reward strategy is geared towards achieving the desired behavior of employees, providing the organization with a competitive advantage over its competitors and the ability to retain its employee’s. Use the evidence from research and elsewhere to throw light on and to illustrate the problematic links between rewards polices and practices. While developing a good reward strategy, it is imperative that the key issues in a business plan and strategy should be identified as they affect the policies and processes of the business. Any factors that can affect the success of the organization must also be identified as they are likely to have implications on the employees and reward strategies that are already in place. Most of the times, organizations tend to work from identifying the strategies first without considering other factors that would make the strategies work. Some top management officials sometimes make decisions about creating a successful strategy without involving the other stakeholders and this could lead to a conflict and therefore the opinions of the various stakeholders in the organization must be taken in account while developing a reward strategy. Therefore, players such as the managers, team leaders, union representatives, technical staff, employees and their representatives must be involved in this process (Cornelius 2001). It is important that while a new strategy is being implemented, the existing reward policies and practices must also be put into account as they assist to identify areas that need corrections or improvements bearing in mind that that the business environment is ever changing (Shields 2007). The external environment must not be ignored because it could lead to conflicts occurring about a new reward strategy .While developing the reward strategy, it is important to consider the external environments that affect a business such as the tax regulations, government policies, competitive pressure both locally and internationally, economic trends and how the company’s competitors have developed their strategies. The top management must also be informed of the strategies to be implemented so that their suggestions can also be considered. Finally, the reward strategy must be communicated to all and plans for its implementation must also be put in place (Cornelius, 2001). The performance of any business largely depends on the quality of its management, quality of employees and the reward system that has been put in place. The effectiveness of the system must not be left to the reward system in place but it must be inclusive of the culture, management style and the corporate values that have been put in place. From the organizations point of view, the reward strategies must be able to attract and retain the high quality employees by properly motivating them. The strategies play a very big role in communicating about the organizations standards, its values, performance and what it expects to achieve in the future (Cornelius, 2001). A good reward strategy must also consider the requirements of the employees. The employees must be treated like stakeholders who have rights to be heard and air their opinions while the policies of the business are being made. The reward strategy must be able to encourage the kind of employee’s behavior that assists the organization to meet its key objectives and also maintain a balance between the key performance drivers of the organization such as customers, people and processes involved. It must also allow the organization to achieve values in areas such as good customer management, teamwork, innovation and improvements in the quality of work that has been done (Shields, 2007). The employees must be treated fairly, equitably and with consistence while addressing issues to do with their pay and compensation. Therefore, the organization must be internally equitable and very competitive externally. This theory has however had its limitations whereby, the pressures of external factors such as the market may override the internal equity consideration especially when people who are not well qualified are hired (Brown, 2001). According to Schuster and Zingheim, for people to be competitively paid, it is contingent upon the provision of high quality work, high productivity and reasonably high performance so as to achieve the goals and objectives of the organization. While coming up with the key issues that affect the reward processes, it is important that emphasis is laid on people who are good performers with high levels of expertise. The continuous changes that occur in the market, the disintegration of the labor markets, high rates of inflation, shortages of skilled workers and the growth of art time jobs must not be ignored. Identify and analyze the practical and theoretical problems associated with the question and in particular how changing business environment circumstances impact upon reward policies and practices. The senior management should play a leading role in interpreting the external environment in which a business operates in, managing talent to add value to the company and also shaping the company’s corporate culture. The business environment can affect the reward strategy that an organization can have. In the current economic meltdown, businesses have actually declined in their capital spending, investments and the amount of money set aside in order to compensate their employees. Many companies’ earnings have actually fallen together with share prices in the capital market leading to the lower performance of businesses. With the dwindled incomes that companies are getting, they have been forced to cut down on what had been set aside for reward strategies. Pressure on the management to perform can also affect the reward strategies that have been initiated by a company. The Board of Directors may pressurize the management to meet short term obligations that do not follow ethical and sound practices and therefore ignoring the option of rewarding employees .The management therefore adopts practices that are not fair, equitable and consistent to the lower level employees in order to meet the perceived expectations of the investors, suppliers and the capital markets (Brown, 2001). Global competition also plays a role in affecting the reward policies and practices that an organization may have put into place. The impact of global competition on the reward schemes has been used to encourage an organization on how to use flexible measures that respond quickly to the demands and pressures including the variation in market rates, retention and recruitment issues (Brown 2001). Another factor that affects the environment in which an organization works in is the industrial relations. They influence the reward practices by pressuring the management of organizations to pay their employees equally and fairly. They produce policies in matters such as evaluation of jobs, structures of pay, policies on protection and the use of pay audits .They have consistently demanded for transparency in the compensation schemes and they have a right to develop new reward strategies. The management of any organization must collectively bargain with the labor unions over any financial gains, hours to be worked and working conditions that are awarded to the employees. Therefore, it is imperative that while designing a reward system, the top leadership must do so in consultations with labor unions. This will help the management to keep the reward system from being a source of potential conflict and grievances between the company and employees (Shields, 2007). The government should also not be left out while policies on reward practices are being made. The Government intervenes to ensure the managers have the right skills and expertise to implement these reward strategies. The Government also ensures that the strategies are motivational and flexible so that they meet the requirements of the employees and that the management information systems are accurate and that they quickly meet the demands of the employees (Brown, 2001). In the UK, the legislation affects the pay policies and practices that are involved in the making of a strategic reward system .The Equal pay Act suggests that pay differences should not be tolerated if the reason being given is based on gender differences of the employees. It requires that all employees must be paid equally depending on the value they add to the company. Therefore, if both a man and a woman do the same kind of work and working for the same hours, then, they should be paid equally. Under the minimum wage Act, it provides that there should be a minimum wage level that employees should be paid in a day (Brown, 2001). It also states that the minimum wage must not be determined by where a person lives, where they work, the sectors of the economy the serve in or and on whether the company is big or not. The working time legislation provides that there should be a limit of about forty eight hours that a person may work. This occurs if an employee works voluntarily exceeding the normal working hours. The employees are also entitled to a minimum paid leave that should not be less than four weeks in a year. The Data collection Act also allows employees to have access to information from the company records so long as the information is not confidential or the information that is to be used by the management is for forecasting, planning and for management purposes. The corporate culture of any business organization can play a very big role in determining the kind of reward system that should be put into place. The corporate culture entails the shared beliefs, values, norms and assumptions within the working environment .A company that has a positive working corporate culture creates an enabling environment to improve performance in the organization. It usually helps to shape behavior in the organization by guiding the employees on what is expected of them. A negative working environment tends to create barriers that prevent the organization from achieving its strategic goals and objectives (Armstrong 2007). Therefore, it is important that while designing a good reward system, a company must make reference to the existing culture of the company so that it fits in well in the organizations strategy. As part of the corporate culture, the employees must be treated like stakeholders who are involved in the decision making process for the organization. Thus, when people feel that they are being recognized, they get motivated and improve on their performance in the company.Organisational disruptions that are occasionally caused by mergers and acquisitions can also affect the policies and practices of the reward system whereby, if the new management takes over an organization, it may change the reward strategy to suit them at the expense of the employees. Employees must also be recognized while coming up with a good reward system. The employees must be listened to and their opinions acted upon in areas such as job evaluation, contingent pay and management of performance (Armstrong, 2000). Use theoretical constructs to throw light on current and emergent practices with regard to reward and also use current and emergent practices to evaluate and illustrate theoretical constructs. It is important that companies embrace an effective reward management system that assists a business to achieve its set goals and objectives by attracting and retaining the best employees who are motivated, competent and very loyal to the company (Shields, 2007). The reward system must be concerned with the total remuneration including the basic pay for employees, performance related benefits and other fringe benefits to the employees. In return for their full commitment, employees expect both financial and non financial rewards such as being given competitive salaries, promotions, stock options and other fringe benefits. Other rewards that employees require are the recognition for their achievements, responsibilities, competency and the need for personal and career growth with the company. Some of these benefits are geared towards meeting the specific needs of some employees in a very special manner so as to retain them (Armstrong, 2007). Today’s organizations realize the important role that reward strategies play in contributing to the success of organizations. The reward strategy also entails giving employee’s soft rewards such as giving employees flexible working hours and part time jobs as opposed to full time jobs where employees can also attend to other issues. According to Lawler, business organizations are slowly moving from the traditional approach whereby people were just paid for the time and hours worked to a more modern approach that is based on employee performance. Previously, the reward strategy was largely seen as an issue of just paying employees within fourteen days or one month but today, the rewards strategy entails the value that an employee to his employer. It includes providing remuneration, benefits and career advancement for the employees. Remuneration includes the pay and incentives that are given to the employees both in the short term and long term (Armstrong, 2002). A good pay structure must be able to address the issue of an equitable, fair and consistent pay, manage the discrepancies that occur between different job groups ad also reward employees on the basis of their contribution, skills and competency. Initially, managers believed that the salary that was paid to employees was enough to provide a solution to attracting and retaining employees but today, organizations have come up with a total remuneration package that includes other benefits. Benefits refer to what is usually given to employees mainly to motivate them and improve on their performance. These benefits include superannuation, life and work benefits, on site maasages, work based pension’s occupational benefits, concierge benefits and car benefits and that they vary from employee to employee (Armstrong, 2002). Career advancement is another way that companies are looking at as part of the reward strategy. It entails building of talents, advancements in careers, a pleasant working environment, the ability of employees to make decisions that affect the company and opportunities for career growth. Each and every employee represents the future of the company and therefore the company has to reward them accordingly (Armstrong, 2002). Asda supermarket is the second largest supermarket in the UK with over 279 stores and on average they recruit 7000 employees per annum.Every year, the employees undertake an intensive training program in areas of IT, Finance, Marketing and Logistics. It also runs a training program that costs them over $11.5 million per year to encourage employees to move to the next level of the management hierarchy. The staffs receive a two day induction training while the managers in the stores department have to go for a two months training program. The employees are given maternity and paternity leaves that are usually paid together with adoption leave and career breaks. They have also been given an option of working from home and very flexible working hours. The company has also in the past motivated its female employees by creating posts of senior managers and the posts created include; the Directors of Policy and development, Head of colleagues relations, head of rewards and benefits, Head of Logistics and the retail people director (Armstrong, 2007) Another large organization in the UK is the Tesco supermarket whereby, they employ over 11,000 employees per annum through advertising and referrals from the employment referral systems. When people are employed, they are not usually put on probation because they believe they employ the best people and talents to work for them. The new employees are also given a chance to find out if the Tesco is a good employer or not .It provides both paternity and maternity leaves to its employees together with flexible working hours, job shares and shift swaps while working. Tesco supermarket has a training program divided into bronze, silver and gold levels whereby at bronze level employees are trained for the basic skills in safety and health. At the silver level employees are trained in specific areas such stock handling and proper knowledge of products that they deal with. At the Gold level employees are trained to be experts in their areas of expertise. They also conduct performance management by encouraging all the senior managers to engage on discussions with the junior staff to encourage them to build teams and work together closely. They have also employed a feedback program called TWIST(Tesco Week In Together) whereby, the senior managers usually move around all the departments talking to the lower cadre of employees to get their opinions on how to run the company (Armstrong, 2007). Conclusion. Despite the economic meltdown, organizations must strive to motivate their employees so that they can improve on their performance. All employees of a business must be regarded as stakeholders and they should be valued as important assets of the business so as to assist an organization to meets its set objectives. A good reward system that is well managed without manipulation is crucial for any business as employees feel more appreciated and it makes them improve on their performance leading to growth and stability of the company. Companies that have adopted a good reward and performance system have benefited from a company’s competitive profile in the job market, it has maintained its best employees thus reducing a high rate of labor turnover, increased the employees motivation and in return it enables a company attract the best employees in the market. Every manager must ensure that they involve their employees in the running of the organization because workforces that are fully engaged in the activities of their organization and understand how they fit in the management assist in sustaining the growth of the company. Therefore, the management has to realize that the performance of the organization cannot be left in the hands of reward management alone but it must be inclusive of teamwork, the management style, the corporate culture of the organization, the employment development processes and the operating structures of the organization.  References Armstrong, M 2007, a handbook of employee reward management and practice, 2nd Edn, Kogan Page Publishers, United States of America. Armstrong, M 2002, Chartered Institute of Personnel and Development, 3rd edn, CIPD Publishing, United States of America. Armstrong, M 2000, Strategic Human Resource Management: A Guide to Action, 2nd Edn, Kogan Page Publishers, United States of America. 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